What type of risk response involves shifting the risk management responsibility to a third party?

Transferring the risk is a strategic response that involves shifting the responsibility for managing the risk to another party, typically through contracts or insurance. This approach allows the organization to protect itself from potential financial losses or liabilities that may arise from certain risks by making another entity responsible for them. For example, purchasing insurance transfers the financial burden of certain risks to the insurance company, while outsourcing certain operations to another firm can also shift responsibility for operational risks.

This method is particularly useful when the risk is significant and the organization prefers not to accept the exposure entirely but still wants to continue its operations. By transferring the risk, the organization can focus on its core responsibilities and reduce its vulnerability to adverse outcomes. This response is a common practice in risk management strategies, emphasizing the importance of contractual agreements and insurance policies in defining and managing risk ownership.